400% rise: Fee to renounce US citizenship goes up fourfold to $2,350

The cost of getting rid of US citizenship has quadrupled to $2350, up from $450. The changes will come into effect on September 6th and the State Department says it is necessary to cover the real cost of processing an application to lose citizenship.

The price hike marks a sharp u turn from 2010 when the State
Department decided on the $450 fee “in order to lessen the impact
on those who need the service and not to discourage the
utilization of the service, a development the Department feels
would be detrimental to national interests.”

Announcing the move this week, the State Department defended it
the price tag saying it had to reflect the true cost of the
process.

“Demand for the service has increased dramatically, consuming
far more consular officer time and resources. Documenting a US
citizen’s renunciation of citizenship is extremely costly,
requiring American consular officers overseas to spend
substantial amounts of time to accept, process, and adjudicate
cases. The Department believes there is no public benefit or
other reason for setting this fee below cost,” wrote Under
Secretary of State Patrick Kennedy.

But Kevyn Nightingale, a tax adviser to people who want to give
up their US citizenship, said that he could not believe the
process really costs that much.

“It’s supposed to be a cost recovery change and not a tax
revenue generator. Having watched the process with so many of my
clients, I have trouble believing that it really costs $2,350
apiece,” he told Global News, a Canadian news and current
affairs television network.

Nightingale pointed out that the State Department notice gives an
estimate of a consular officer’s time at $135 an hour working for
20 hours.

“That means that they feel they’ve got almost 20 hours for
each person who is expatriating, and that seems like a lot of
time to process the paperwork. I have trouble believing that it’s
20 hours of time. This is, like most government fees, an
arbitrary amount. I don’t think you can say much more about
it,” he said.

Kennedy says in a memo that the process involves at least
“two intensive interviews”, but people who have been
through the process say the time they spend in the consulate is
much less than that.

Patricia Moon who renounced her citizenship at the Toronto
consulate in 2012 said it took nothing like that amount of time.

“The questions are minimal and I didn’t spend more than 15
minutes at the window either time. It’s not intensive. They ask
you: ‘Are you aware of the ramifications of your actions?’ And
‘Are you doing this of your own accord?” she said.

New tax laws have seen a record number of Americans renouncing
their citizenship this year. In the first quarter
only just over 1,000 Americans gave up their nationality,
according to Bloomberg News. That’s a hike from the 670 who did
so in the same time span last year, and it’s already one third of
the way to matching the total number of Americans who renounced
their citizenship in 2013.

However, a spokesperson said that the price increase was not
meant as a deterrent.

“We can’t speculate on whether the backlog for renunciation
appointments will ease as a result of the fee increase.”

Critics have said the price increase was more than twenty times
the average level in other high income countries

In order to leave America, citizens have to prove they’ve been
paying tax for five years and if you are worth more than $2
million or if you’ve been paying income tax of $157,000 or more
then you have to pay an exit tax like a capital gains tax.